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Can these marriages be saved?

For now, network-affiliate relations seem cozy. But that could change in a real hurry1/13/2002 07:00:00 PM Eastern

By Steve McClellan

Some executives say network-affiliate relationships have improved over the past years; now, several new issues threaten to undo the romance. Just as in some real-life relationships, money is at the root of the problems.

At Fox, the network's 21/2-year-old inventory-buyback plan, in which affiliates buy back commercial minutes from the network, is up for renewal in June.

The network has approached several Fox affiliate groups about extending it, but the affiliates' board of governors has told network executives that the plan was—from their standpoint—a failure. The affiliates don't want any part of "Son of Buyback," as some of them refer to any possible extension.

At ABC, the third year of its deal by which affiliates help pay for the network's NFL rights just expired.

Also, ABC has let it be known it intends to "repurpose" programs much more in the future than in the past—that's why it bought the Fox Family Channel—which could make for a tougher renegotiation of the pact.

Affiliates also worry that the network will try to impose greater fees on them to help pay for the new (and yet-to-be-finalized) deal with the NBA.

Alan Frank, president of the Post-Newsweek Stations and an architect of the complaint document, which was considered virtually a declaration of war in some quarters, says he hears that the FCC is in the process of addressing the petition. Network sources counter that their attorneys believe nothing will come of it.

Fox affiliate board chairman Cullie Tarleton, who is retiring from Bahakel Communications (and the affiliate board) at the end of the month, says he wrote a letter to News Corp. President Peter Chernin several weeks ago, indicating that Fox affiliates had no interest in extending the buyback plan. Under that plan, which took effect in mid 1999, the affiliates started paying a combined $60 million annually for prime time spots they had previously received without charge.

"It really has been a financial hardship for the stations," Tarleton says. "When you couple it with the lousy economy out there, the broadcasting recession and the network's performance over the life of the buyback, you had a triple whammy. And, for a lot of stations, it really was the difference between positive and negative cash flow."

Tarleton does credit Fox with giving some relief, to the tune of $5 million a year, mostly to medium-size- and smaller-market affiliates. But that didn't mitigate most of the pain inflicted, he says.

The Fox board will meet with network executives next week at the NATPE convention, and no doubt the subject will come up. "If the network tries to impose another buyback, it will meet huge resistance," says Tarleton, who is still awaiting a reply from Chernin. "I know if it were put to a vote among the current board, it would be defeated handily."

Bruce Baker, executive vice president, Cox Broadcasting and chairman of the ABC affiliate board of governors, said talks between the board and ABC on a new NFL-exclusivity pact have been ongoing, with further meetings set up for the end of January.

Under the just-expired agreement, ABC affiliates paid $45 million annually and gave back 10 Saturday-morning 30-second spots, in exchange for eight new prime time spots and various levels of program exclusivity, depending on genre and daypart. Baker says it's not clear yet whether ABC wants to increase the cash component of the deal.

Talks could get stressful if the network wants to expand its repurposing rights, says Baker. The network now has the right to repurpose up to 25% of its prime time slate at will. "But the truth of the matter," he says, "is they haven't got close to using the full repurposing that exists in the current agreement."

As to the NBA deal, Baker says it would be an unwelcome surprise if the network asked the affiliates to help pay for it, "because, so far, I don't know of a single affiliate that they consulted regarding going after the NBA."

Meanwhile, CBS and its affiliates agreed late last year to extend their NFL-exclusivity deal for a couple more years. The new agreement is said to include minor modifications in the exclusivity provisions, but the affiliates approved it "without any contention at all," says one affiliate board member.

NBC has no blanket exclusivity deal with its affiliates, preferring to deal with the issue in individual affiliate renewal talks. Network sources say it has signed up about 85% of its affiliates to long-term renewal agreements in the last couple of years.

The most recent deal came last week with Post-Newsweek Stations' WDIV(TV) Detroit and KPRC-TV Houston. As evidenced by his role in the NASA complaint, Frank has been a frequent thorn in NBC's side on a number of affiliate issues.

But that didn't prevent Frank and the network from reaching a new long-term affiliate deal, which has elements both sides like. Neither Frank nor network executives would comment on the terms, but sources familiar with them say Post- Newsweek gets $9 million a year for 10 years. That's a nice chunk of change but 55% less than what the group had been getting under the old agreement and similar to other agreements the network has struck with its big affiliate groups.